Gently Does It!
BUILDING A PORTFOLIO gently is, in my opinion, absolutely crucial to making money out of the markets in a way that won’t sooner or later implode. It is harder to do than you might think.
After all, we are TRADERS right?
And everyone out there in the market is DESPERATE for you to trade MORE.
When in fact to make money you should trade less.
Yep, I really do think that the less you trade the more you will make.
It’s worked for me. I don’t trade every single day. I have even let a week go by where I have seen no good reason to trade – and therefore haven’t traded.
We're in a volatile period right now with Brexit hovering over everything making the FTSE and share movements hard to predict. Especially as Brexit makes shares at the top of the FTSE very volatile indeed depending on where the Pound is going.
Why does everyone want you to trade, trade and trade some more? Because they all make money out of you when you trade and they don’t when you don’t.
Over-trading is also about EXCITEMENT! We want some ACTION!
People simply press the buy and sell button too often – they feel like they should be making a trade every day – or most days. And this is quite common with new traders. They get the bug and want to chase every stock that moves.
The desire to over-trade probably stems from our emotions. We want to make money quickly and we think if we keep trading, the money will come pouring in. Wrong! It’s more likely to go pouring out. Plus…
The more trades you have running, the more time you have to spend monitoring them, the more stress you’ll feel and the poorer your decisions will be.
And on commissions alone you’ll waste a small fortune.
So don’t go bananas and have a whole raft of open trades everywhere. Stick to a sensible number that you can keep control of.
For a couple of years in the 1990s, I was a professional gambler on the horses. I even owned a couple, so I had access to a bit of inside info on form and the like. But even with that info, I didn’t make a lot of money – just about enough to get by. Never anything big.
It’s next to impossible to make a living on the horses. However, the stock market is different because if you stay disciplined and calm you can definitely make big money.
It’s not about who crosses the line first, but about picking businesses whose performance will keep getting better – and there can be plenty of winners in that race. Even taking Brexit into account!
But you have to invest and not gamble to become a stock market winner who makes real regular money.
What’s the difference between a stock market gambler who loses and a stock market investor who wins?
Quite simple: a market gambler is itching to trade and press that exciting deal button almost for the sake of it. And gamblers make up 80% of spread betting accounts that lose.
This is okay if you’re a really hot day trader, but sadly there are hardly any of them around. I’ve had it said to me time and time again (especially from people I’ve met who work for spread betting firms):
“Our losing accounts are those which make too many trades.”
In fact, spread betting sites are pretty much designed to make you over-trade.
- Gambling is putting money on shares that you know nothing about. Buying something for a punt – and with no trading plan in place.
- Investing is buying into a company you’ve done your research on and trying to get your timing right.
I get so many emails starting:
‘I am going to have a punt on… ’
Don’t have ‘punts’. Invest. Make money. If you have punts you will lose, maybe not right now but eventually. Punts are just lazy gambling.
So there – have I made myself clear?
There is no rush if you are a beginner. Take it easy, build slowly.